The Danish authorities recently announced that they will allow mortgage-credit bonds - the Danish equivalent of German pfandbriefe - to be used as collateral for repos with the central bank, Danmarks Nationalbank.

However, according to Hugo Frey Jensen, a Nationalbank official, the same treatment has not been extended to U.S. style mortgage-backed securities, though this may change in the future.

Some market watchers were hoping that a decision to allow MBS paper to be used as repo collateral would kick-start Denmark's securitization market, one of Europe's least active. The country has seen several privately placed MBS deals and mortgage assets have been sold into conduits, but no public term deals have been done.

Elsewhere in Europe, central bank decisions to allow MBS paper to be used for repos have sparked issuance spurts. In Spain, for example, the change led to many banks issuing MBS transactions, though the vast majority of the resulting paper was retained and had a negligible effect on developing a secondary mortgage market.

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